The Dollar Slides as Asian Equities Rise Early

Earlier in the Day:

Economic data through the Asian session this morning was limited to New Zealand’s Electronic Card retail sales figures for January. Following disappointing numbers in December, card sales rebounded in January, rising by 1.4%, which was well ahead of a forecasted 0.5% increase.

January’s increase was attributed to a 1.5% increase in card transactions on hospitality, including bars, cafes, restaurants and takeaway shops. There was also a 1.2% increase in card transactions on durable goods and a 1.5% jump in fuel transactions.

The Kiwi Dollar found strong support through the early part of the Asian session, rising by as much as 0.3% before easing back to $0.7263, a 0.11% gain for the morning.

Elsewhere, the Aussie Dollar was up 0.20% to $0.7829, supported by rising commodity prices, while the Japanese Yen was up 0.12% to ¥108.67 against the U.S Dollar, as the U.S. Dollar softened through the session.

In the equity markets, there was some relief for the Hang Seng and China equities on Monday, with the Hang Seng and CSI300 up 0.71% and 1.3% respectively at the time of writing, supported by a 145 point gain in the Dow mini in the early part of the day.

It wasn’t such a great start for the ASX200 however, with the big-4 banks in the red, as the Australian royal commission inquiry into Australia’s bank and financial services practices and wrong doings got underway. The ASX200 closed out the day with a 0.30% loss.

The Day Ahead:

For the EUR, key stats out of the Eurozone this morning are limited to France’s finalized inflation figures for January. Barring a deviation from prelim numbers, the figures are unlikely to have a material impact on the EUR, which has been in recovery mode ahead of the European open.

At the time of writing, the EUR was up 0.22%to $1.2279, with a pullback in the Dollar providing the EUR with this morning’s gains. With negative chatter over the forming of the grand coalition leaving Merkel on the defensive, the #NoGroKo movement, aimed at thwarting the grand coalition, could bring a final twist to German politics in the coming weeks and a possible end to Merkel’s run at the helm.

For the Pound, Dollar weakness has come at a timely moment, with the Pound up 0.21% to $1.3856 at the time of writing.

Focus will continue to be on Brexit over the near-term, with BoE Governor Carney having talked up the prospects of a rate hike last week, whilst saying that much depended upon the outcome of Brexit talks and what kind of transition and trade deal Britain negotiates.

The Brexit chatter is certainly not too favourable for the Pound, with talks of a 2^nd EU Referendum and even the possibility of another General Election doing the rounds. It’s a poignant time for Theresa May, the Tory Party and Britain, with Theresa May due to deliver a series of speeches to outline the Road to Brexit. A failure to unite the Tory Party could spell disaster for the British PM and the Pound.

With no material stats scheduled for release today out of the UK this morning, BoE MPC Members Vlieghe and McCafferty, scheduled to speak through the day, could provide further support for the Pound if there is any hawkish commentary on policy and the UK economy.

Across the Pond, there are no material stats scheduled for release out of the U.S this afternoon, leaving the markets to consider last week’s moves and whether the shift in sentiment towards inflation and policy was overdone.

U.S inflation figures due out Wednesday will certainly provide some guidance, but for now there has been some pullback the Dollar, with the Dollar Spot Index down 0.33% to 90.14.

It won’t just be the U.S Dollar that will be at the mercy of the January inflation numbers, with the global equity markets under the threat of rising yields and a more aggressive rate path for the FED that could ultimately unhinge U.S and global equities.

The softer Dollar has provided some optimism ahead of the U.S session, with the Dow Jones mini, S&P500 mini and NASDAQ100 mini all in positive territory through the early part of the day.